Monday, February 28, 2011

The 112th Congress is expected to consider separate free trade agreements (FTAs) signed by the Bush Administration with South Korea, Panama, and Colombia. If and when submitted, these trade agreements will be debated under trade promotion authority, or fast-track rules, designed to expedite congressional consideration. Liberalizing trade in agricultural products, particularly the pace of expanding market access for the more sensitive agricultural commodities, was one of the more challenging areas that trade negotiators faced in concluding each of these FTAs. In each instance, issues dealing with food safety and animal/plant health matters (technically not part of the FTA negotiating agenda) were not resolved until later.

Of these three pending agreements, the U.S.-South Korea (KORUS) FTA would be the most commercially significant for U.S. agriculture since the North American Free Trade Agreement (NAFTA) took effect with Mexico in 1994. Because Colombia, one of the largest markets in South America, imposes a high level of border protection on agricultural imports, the Colombia FTA has the potential to noticeably increase U.S. agricultural exports. Though Panama is a relatively small market, U.S. exporters would have opportunities to make additional sales.

Many U.S. commodity groups, some general farm organizations, and many agribusiness and food firms support these three trade agreements. They argue for quick approval to secure the benefits of additional agricultural exports once all three are fully implemented (estimated to range from $2 billion to $4 billion). They contend that the timely approval of these FTAs will protect or enhance the U.S. competitive position in these three markets. Their focus has shifted from not simply securing the gains already negotiated, to ensuring that the United States moves before other major agricultural exporting countries (e.g., the European Union, Australia) lock in preferential access under their FTAs negotiated with South Korea, Colombia, and Panama.

During 2010, the Obama Administration’s objective was to address outstanding issues of concern to some Members of Congress before submitting these FTAs to Congress for consideration. In December, U.S. and South Korean negotiators agreed to changes in the KORUS’ auto provisions sufficient enough for the President to call now for its quick approval. Though the Administration and some Members of Congress sought a full opening of South Korea’s market to U.S. beef (i.e., slaughtered from all cattle, irrespective of age), Korean negotiators succeeded in deflecting this issue off the table. Recent movement by Panama on a bilateral tax information sharing treaty and labor rights issues could influence the U.S. timetable for taking up the Panama FTA. Colombia’s handling of labor union violence and human rights is viewed by the Administration and some Members as the main issues that still need to be resolved before that FTA is submitted to Congress for a vote.

Some Members disagree with the Administration on the timing of when Congress should take up these trade agreements. Republican leaders argue that all three FTAs should be either voted on as one package or in quick succession. Some also have suggested that their support for other trade programs awaiting congressional renewal depends on the White House making clear its strategy for moving these agreements. The Administration has stated it will submit the KORUS FTA soon in order to secure congressional approval by mid-2011, and will forward the Panama and Colombia FTAs when the pending issues are resolved.

Date of Report: February 14, 2011
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Friday, February 18, 2011

Sharply lower milk prices in 2009 activated standing federal programs to support dairy farmers. In calendar year 2009, the federal government spent more than $1 billion to support the industry through the Milk Income Loss Contract (MILC) Program, the Dairy Product Price Support Program (DPPSP), and the Dairy Export Incentive Program (DEIP). Following appeals from dairy farmers for more financial assistance, Congress granted another $350 million in 2009 in the form of supplemental payments to dairy farmers and government purchases of dairy products.

While farm milk prices have increased since summer 2009, the financial stress encountered by dairy farmers in 2009 has led the industry and Congress to reconsider how to deal with fluctuations in milk prices and financial prospects for dairy farmers. Some members have voiced interest in developing alternatives to current programs (which expire in 2012) and incorporating them as part of the next omnibus farm bill or enacting the policies separately before then.

The dairy industry is currently developing or advocating a variety of policy changes. All of the proposals discussed in this report—loosely categorized as either supply management, marketbased, or tiered-pricing—have implications for U.S. dairy farmers, competitiveness of the U.S. dairy industry, and international trade.

Supply management proposals such as H.R. 5288 and S. 3531, introduced in the 111th Congress, are designed to prevent depressed farm milk prices while reducing price volatility through supply management. The National Milk Producers Federation (NMPF) also has proposed a market stabilization component as part of its comprehensive package of suggested reforms to dairy policy. Supporters of price stabilization and supply management say that inherent incentives to overproduce need to be offset by a program to manage supplies in a measured way. Critics of supply management, including dairy processors, contend that such measures could reduce the competitiveness of the U.S. dairy industry, limit its incentive to innovate, and raise consumer prices, because, they argue, a pricing system based on supply control and/or cost of production potentially rewards inefficiency.

The market-based approach, including a separate element of the NMPF package, represents an opposing view on how the federal government should address the problem of farm milk price volatility and periodic financial stress for dairy farmers. This approach contends that, because it is difficult to manage milk supplies and prices administratively, the best approach is to provide a government program that helps farmers manage risk associated with volatile prices of milk and feed. Specifically, a new “safety net” would be established to protect a dairy farmer’s “margin”— that is, the farm price of milk minus feed costs—regardless of current price levels. Critics expect that incentives to overproduce will aggravate the financial woes of the dairy industry indefinitely, and thus argue that controlling potential price variability and combating depressed farm prices with supply management is necessary for the long-term financial health of producers.

The third area of potential policy change is to alter the current pricing approach used in federal milk marketing orders (FMMOs) to directly increase dairy farm revenue. For example, one potential change to base milk pricing in FMMOs on the cost of milk production (i.e., S. 1645, introduced in the 111th Congress) would imply higher prices received by dairy farmers. However, some are concerned that the long-run competitiveness and stability of the U.S. dairy industry could be at risk because of the unknown effectiveness of provisions to discourage overproduction.

Date of Report: January 21, 2011
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The 112th Congress may provide oversight over how the law is implemented, including FDA’s coordination with other federal agencies, such as those in the U.S. Department of Agriculture (USDA) and the Department of Homeland Security (DHS). Implementation of the law will depend largely on the availability of discretionary appropriations, and some have questioned whether additional funding is available in the current budgetary climate.

In addition, the 112th Congress may continue to consider changes to other food safety laws and policies that are being actively debated in Congress. Among these are food safety initiatives covering meat, poultry, and seafood products; legislation intended to curtail the non-medical use of antibiotics in animal feeds and to ban the use of certain plastic components commonly used in food containers; food labeling; and the use of plant and animal biotechnology. Several of these issues were actively debated in the 111th Congress during the food safety debate leading up to passage of the FSMA.

Some in Congress also may continue to push for additional policy reforms either to existing FDA or USDA food safety laws to address other perceived concerns regarding the safety of the U.S. food supply, including resources and regulatory tools to adequately combat foodborne illness, as well as coordination and organization among federal agencies.

Date of Report: February 10, 2011
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Foodborne illness-causing bacteria on farms can enter the food supply unless preventive measures are in place to reduce them, either prior to or after harvest. Also of potential risk to the food supply are pesticide residues, animal drugs, and certain naturally occurring contaminants.

There is interest in examining on-farm practices, given continued major outbreaks of foodborne illness involving both domestically produced and imported foods. An example is the case in April-July 2008, when more than 1,000 persons in more than 40 states and Canada were found to be infected with the same unusual strain of bacteria (Salmonella Saintpaul), which was later traced back to fresh peppers from a farm in Mexico. In May 2010, a large-scale recall of more than 550 million shell eggs from two farms in Iowa was linked to concerns about a nationwide increase in Salmonella Enteritidis (SE) infections. Most recently, in November 2010 through January 2011, more than 100 people in 18 states were sickened from Salmonella-contaminated sprouts linked to an Illinois organic farm.

Food safety experts agree that an effective, comprehensive food safety system should include consideration of potential hazards at the farm level. However, opinions differ on the need for more stringent, government-enforced safety standards for farms, as exist for processors and others in the food chain. This question and others, such as the potential cost of new interventions to producers, taxpayers, and consumers, are at issue as Congress debates food safety legislation.

The lead federal food safety agencies are the Food Safety and Inspection Service (FSIS) within the U.S. Department of Agriculture (USDA), which regulates major species of meat and poultry and some egg products, and the Food and Drug Administration (FDA) within the U.S. Department of Health and Human Services (HHS), which regulates virtually all other foods. Generally, these agencies’ regulatory oversight of foods begins after the farm gate, at slaughter establishments and food handling and manufacturing facilities. However, various activities of these and other federal agencies involved in assuring the safety of the food supply can, and do, have an impact on how farms and ranches raise food commodities.

In December 2010, the 111th Congress passed comprehensive food safety legislation (FDA Food Safety Modernization Act (FSMA), P.L. 111-353). This newly enacted law is focused on foods regulated by FDA and amended FDA’s existing structure and authorities, in particular the Federal Food, Drug, and Cosmetic Act (FFDCA; 21 U.S.C. §§ 301 et seq.). FSMA is the largest expansion of FDA’s food safety authorities since the 1930s; it does not directly address meat and poultry products under the jurisdiction of USDA. The provisions in the law that could have the most direct effect on on-farm activity, especially for produce growers, could be the establishment of new standards for produce safety. Other requirements that could affect on-farm activity are facility registration requirements, records access and/or inspection requirements, food traceability requirements, hazard analysis and risk-based preventive controls, and targeting of inspection resources. The 112th Congress will likely provide oversight over how the law is implemented, including FDA’s coordination with other federal agencies. Implementation of the law will depend largely on discretionary appropriations, and some have questioned whether funding is available in the current budgetary climate.

Date of Report: January 18, 2011
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Thursday, February 10, 2011

Some in Congress have expressed concern about recent environmental regulations and administrative initiatives. Criticism from lawmakers and industry leaders is primarily focused on environmental regulations promulgated by the Environmental Protection Agency (EPA). Some claim that EPA is overreaching its regulatory authority in several environmental arenas. The agriculture community has been vocal with its concerns, contending that EPA appears to be focusing its regulatory efforts on agriculture. Environmentalists, on the other hand, are encouraged by some of EPAs regulatory efforts, claiming that some agriculture operations do pose a public health and environmental risk and should be regulated.

A healthy agriculture industry and a healthy environment are both important to the nation. However, agricultural production can have varying impacts on the environment. The use of both natural resources and synthetic inputs in agricultural production can sometimes create a negative impact on human health and the surrounding ecosystem. The magnitude of these environmental impacts vary widely across the country and change over time. Given the agricultural sector’s size and potential to affect its surrounding environment, there is interest in both tightening environmental policies while also maintaining an economically viable industry. Most recognize the agriculture community’s efforts to protect natural resources while striving to maintain a sustainable and abundant food supply.

The current federal response to environmental issues associated with agriculture is viewed as being both restrictive and supportive. Traditionally, most farm and ranch operations have been exempt or excluded from many environmental regulations. The challenges associated with regulating numerous crop and livestock operations, can be cost prohibitive for government regulators, and environmental policies have historically focused on large industrial sources such as factories and power plants. Therefore, much of the current farm policy addressing environmental concerns is in the form of economic incentives to encourage beneficial production practices.

Recent regulatory activity has generated widespread interest in the depth of EPA’s regulatory authority. The 112th Congress may evaluate EPA and other federal agencies’ roles in regulating environmental protection generally. Other broad options for Congress besides general oversight include review under the Congressional Review Act, amending current law to modify a regulating agency’s authority, introducing freestanding legislation, or offering an amendment on an agency’s appropriation bill that prevents funds from being used for specific actions.

This report covers select environmental regulations that could affect agriculture. The majority of environmental regulations are administered by EPA, though not all. In some cases, agriculture is the direct or primary focus of the regulatory actions. In other cases, the agriculture sector is one of many affected sectors. Of particular interest to the sector are regulatory actions affecting air, water, energy and chemicals. Issues associated with air (e.g., dust and emission) and water (e.g., fertilizer and nutrient run-off) resources are a primary focus to many regulations affecting agriculture because of agriculture’s potential impact to both. Changes in energy policy, namely bioenergy, have recently become important to many in the agricultural industry based on the growing influence of corn-based biofuel production. Finally, the risks associated with agricultural chemical use and possible impacts on human health and the environment have led to recent federal regulatory reviews of chemical fertilizer and pesticide use.

Date of Report: February 7, 2011
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